Key Takeaways
- Smurfit Westrock shares fell 10% after third-quarter adjusted EPS of $0.45 missed the $0.57 analysts expected.
- The company cut its full-year 2026 adjusted EBITDA outlook to about $4.7 billion and blamed roughly $700 million of extra freight and energy costs.
- Management says its paper price increases should more than offset those costs, but it doesn’t expect the full benefit until 2027.
- Analysts expect normalized EPS to rise about 70% in 2027, so the stock now depends on those price increases sticking.
Smurfit Westrock (SW) shares sank 10% this morning after the company missed third-quarter estimates and cut its outlook for the second time this year.
CEO Tony Smurfit blamed the quarter on “unprecedented cost inflation and somewhat weaker than anticipated converting volumes.”
What exactly happened
Before Wednesday’s open, Smurfit Westrock reported these results for the quarter ended Sept. 30:
- Adjusted EPS of $0.45, against $0.57 expected and $0.58 a year ago
- Revenue of $8.16 billion, up 2% but short of the $8.28 billion expected
- Adjusted EBITDA of $1.2 billion, below the roughly $1.3 billion management guided to in July
- An adjusted EBITDA margin of 14.8%, down from 16.3%
For the full year, it now expects about $4.7 billion of adjusted EBITDA. In July it expected $4.9 billion to $5.1 billion, and in February $5.0 billion to $5.3 billion.
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The costs got here first
Tony Smurfit says the company expects to absorb about $700 million of extra freight and energy costs this year, “significantly more than anticipated.” His answer is price increases across most paper grades, which he expects “should more than offset input costs.” The catch is that management expects the full benefit only “into 2027.”
Even in North America, where Smurfit Westrock is sold out in all containerboard grades, the margin slipped to 15.6% from 17.2%.
Margins have moved around since 2021. They peaked near 17% in 2022 and 2023, fell to 13.7% in 2024 and recovered to 15.4% last year…
And for the first nine months of 2026, the adjusted EBITDA margin is 14.3%, against 16.0% a year earlier.
2027 has to do the heavy lifting
Analysts expect normalized EPS of $2.08 this year, then a jump of about 70% to $3.55 in 2027…
Today’s miss and the lower outlook should pull this year’s number down. Whether the 2027 number holds depends almost entirely on those price increases sticking.
Meanwhile, the board kept the quarterly dividend at $0.4523 a share. But free cash flow over the first nine months covered only about a third of the $712 million paid out.
My take: a company that’s sold out in North America has real pricing power, and I expect the increases to show up eventually. But Smurfit Westrock has now cut its outlook twice and missed its own third-quarter target. I’d want to see the pricing in the numbers before paying for a 70% earnings jump.
Fourth-quarter results, likely in early February, will be worth the wait.
So what is Smurfit Westrock stock actually worth?
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